There are multiple errors and misrepresentations in Niall Ferguson’s cover story in Newsweek — I guess they don’t do fact-checking — but this is the one that jumped out at me. Ferguson says:

The president pledged that health-care reform would not add a cent to the deficit. But the CBO and the Joint Committee on Taxation now estimate that the insurance-coverage provisions of the ACA will have a net cost of close to $1.2 trillion over the 2012–22 period.

Readers are no doubt meant to interpret this as saying that CBO found that the Act will increase the deficit. But anyone who actually read, or even skimmed, the CBO report (pdf) knows that it found that the ACA would reduce, not increase, the deficit — because the insurance subsidies were fully paid for.

Ferguson is back with a snarky response ("You know you have hit the target when Paul Krugman takes time out from his hiking holiday"), which basically comes down to: I wasn't wrong, just misleading!

Ferguson writes:

Krugman counters in his Conscience of a Liberal blog by saying: “The ACA would reduce, not increase, the deficit—because the insurance subsidies were fully paid for.” But I very deliberately said “the insurance coverage provisions of the ACA,” not “the ACA.” There is a big difference.

Krugman suggests that I haven't read the CBO's March 2010 report. Sorry, I have, and here is what it says:

“The provisions related to health insurance coverage—which affect both outlays and revenues—were projected to have a net cost of $1,042 billion over the 2012–2021 period; that amount represents a gross cost to the federal government of $1,390 billion, offset in part by $349 billion in receipts and savings (primarily revenues from penalties and other sources).”

So Ferguson's response was: Well, the spending/insurance portion of the Affordable Care Act did increase the deficit, and I was only referring to the spending side. I wasn't referring to the whole thing.

If you read the whole CBO report where that quote is taken fron, it makes it pretty clear that no, the ACA did not add to the deficit (at least based on their math):

The provisions related to health insurance coverage—which affect both outlays and revenues—were projected to have a net cost of $1,042 billion over the 2012–2021 period; that amount represents a gross cost to the federal government of $1,390 bil- lion, offset in part by $349 billion in receipts and savings (primarily revenues from penalties and other sources). The other provisions related to health care and revenues will reduce budget deficits by an estimated $1,252 billion over that 10-year period— including $520 billion in revenues, mostly from new taxes and fees, and $732 billion in outlay savings for Medicare and other federal health care programs (see Figure 1). Those outlay savings reflect the net effect of some provisions that will reduce direct spending—such as lower payment rates in Medicare—and others that will increase direct spending, such as the expansion of Part D benefits and mandatory funding for a number of grant, research, and other programs.

So yes, one narrow part of the ACA increases the deficit. But the whole law, according to the CBO does not.

Again, Niall Ferguson's defense is that he was being very obtuse and misleading.

If you are wondering how on earth the CBO was able to conclude that the net effect of the ACA as a whole was to reduce the projected 10-year deficit, the answer has to do with a rather heroic assumption about the way the ACA may reduce the cost of Medicare. Here’s the CBO again:

“CBO’s cost estimate for the legislation noted that it will put into effect a number of policies that might be difficult to sustain over a long period of time. The combination of those policies, prior law regarding payment rates for physicians’ services in Medicare, and other information has led CBO to project that the growth rate of Medicare spending (per beneficiary, adjusted for overall inflation) will drop from about 4 percent per year, which it has averaged for the past two decades, to about 2 percent per year on average for the next two decades. It is unclear whether such a reduction can be achieved ...”

Ferguson italicized the last line about it being unclear if such reductions can be achieved, as if this line undermines the whole thing.

But Ferguson is truncating the CBO's quote.

Here's the full quote from the same report:

In fact, CBO’s cost estimate for the legislation noted that it will put into effect a num- ber of policies that might be difficult to sustain over a long period of time. The com- bination of those policies, prior law regarding payment rates for physicians’ services in Medicare, and other information has led CBO to project that the growth rate of Medicare spending (per beneficiary, adjusted for overall inflation) will drop from about 4 percent per year, which it has averaged for the past two decades, to about 2 percent per year on average for the next two decades. It is unclear whether such a reduction can be achieved through greater efficiencies in the delivery of health care or will instead reduce access to care or the quality of care (relative to the situation under prior law). Also, the legislation includes a provision that makes it likely that exchange subsidies will grow at a slower rate after 2018, so the shares of income that enrollees have to pay will increase more rapidly at that point, and the shares of the premiums that the subsidies cover will decline.9 Such possibilities could lead to pressure on law- makers to adjust those policies.

So the CBO is not saying that the deficit reductions are unclear. What's unclear is how they will be achieved.